PROJECT

A COMPARITIVE STUDY ON PERFORMANCE EVALUATION OF MUTUAL FUND SCHEMES IN INDIA

INTRODUCTION
Mutual Funds have become a widely popular and effective way for investors to participate in financial markets in an easy, low-cost fashion, while muting risk characteristics by spreading the investment across different types of securities, also known as diversification. It can play a central role in an individual's investment strategy. They offer the potential for capital growth and income through investment performance, dividends and distributions under the guidance of a portfolio manager who makes investment decisions on behalf of mutual fund unit holders. Over the past decade, mutual funds have increasingly become the investors vehicle of choice for long-term investment. It becomes pertinent to study the performance of the mutual fund. The relation between risk-return determines the performance of a mutual fund scheme. As risk is commensurate with return, therefore, providing maximum return on the investment made within the acceptable associated risk level helps in segregating the better performers from the laggards. Many asset management companies are working in India, so it is necessary to study the performance of it which may be useful for the investors to select the right mutual fund. A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of the term "mutual fund", the term is most commonly applied only to those collective investment vehicles (i.e. investment companies) that are regulated and available to the general public for purchase. More often than not, a 'fund' is open-ended in nature, meaning investors can buy or sell shares from/to the fund. A closed-end fund is one where the shares once sold by the fund to the public, trade on exchanges among investors, something like regular stocks do. Hedge funds are loosely considered a type of mutual fund.

Types Open-end funds Open-end mutual funds must be willing to buy back their shares from their investors at the end of every business day at the net asset value computed that day. Most open-end funds also sell shares to the public every business day; these shares are also priced at net asset value. A professional investment manager oversees the portfolio, buying and selling securities as appropriate. The total investment in the fund will vary based on share purchases, share redemptions and fluctuation in market valuation. There is no legal limit on the number of shares that can be issued. Closed-end funds Closed-end funds generally issue shares to the public only once, when they are created through an initial public offering. Their shares are then listed for trading on a stock exchange. Investors who no longer wish to invest in the fund cannot sell their shares back to the fund (as they can with an openend fund). Instead, they must sell their shares to another investor in the market; the price they receive may be significantly different from net asset value. It may be at a "premium" to net asset value (meaning that it is higher than net asset value) or, more commonly, at a "discount" to net asset value (meaning that it is lower than net asset value). A professional investment manager oversees the portfolio, buying and selling securities as appropriate.

Advantages and disadvantage

Mutual funds have many advantages which include

Increased diversification Daily liquidity Professional investment management Ability to participate in investments that may be available only to larger investors Service and convenience Government oversight Ease of comparison

Mutual funds have disadvantages as well, which include

Fees Less control over timing of recognition of gains Less predictable income No opportunity to customize

OBJECTIVES OF THE STUDY

1. To evaluate and compare the performance of equity diversified mutual fund schemes of selected companies 2. To compare the performance of equity diversified mutual fund schemes of selected companies

RESEARCH METHODOLOGY
Secondary data will be taken as a basis of analysis in this project. Top three to five asset management companies will be selected as per AUM. Three to Five equity diversified mutual fund schemes each from selected AMCs would be selected randomly. Daily data about the closing Net Asset Value of the selected schemes is to be collected from the websites www.Amfiindia.com and www.Mutualfundsindia.com. The most popular and widely tracked BSE SENSEX is used as a proxy for the market. The daily closing value of BSE SENSEX is collected from the website www.bseindia.com. The data for that is collected from the official website of Reserve Bank of India. Microsoft Excel is to be used for all the calculations.

SCOPE
A big boom has been witnessed in mutual fund industry in recent times. A Mutual Fund is an ideal investment vehicle where a number of investors come together to pool their money with common investment goal. Therefore a large number of players have entered the market and trying to gain market share in this rapidly improving market. The project is carried out to analyse the performance of mutual fund schemes of five asset management companies. Scope of Mutual Funds has become so wide that people sometimes take long time to decide the mutual fund type; they are going to invest in. Several Investment Management Companies have emerged over the years who offer various types of Mutual Funds, each type carrying unique characteristics and different beneficial features. Hence this project will help to know different mutual fund schemes and their performance over the years.